law on sales review

By:

CCESAR ESAR L.L. VVILLANUEVAILLANUEVA, B.S.C., C.P.A., LL.B., LL.M., FAICD, D.J.S.

AATENEO TENEO DE DE MMANILA ANILA LLAW AW SSCHOOLCHOOLRockwell Center, Makati CityRockwell Center, Makati City

LLAWAW on S on SALES ALES

RREVIEWEVIEW

DDEFINITIONEFINITION (Art. 1458)

PPARTIESARTIES OOBLIGATIONSBLIGATIONS

SSELLERELLER

BBUYERUYER

(1)(1) TO TO TTRANSFERRANSFER OOWNERSHIPWNERSHIP

(2)(2) TO TO DDELIVERELIVER PPOSSESIONOSSESION

(3)(3) TO TO PPAYAY

SSUBJECT UBJECT

MMATTERATTER

PPRICERICE

GGENERAL ENERAL PPRINCIPLESRINCIPLES

CONSENT

“Meeting of Minds”Real Obligation

Real Obligations

SSALEALE

2

EESSENTIAL SSENTIAL CCHARACTERISTICS OF HARACTERISTICS OF SSALEALE::

NNOMINATEOMINATE

PPRINCIPALRINCIPAL

CCONSENSUALONSENSUAL

BBILATERAL/ILATERAL/

RRECIPROCALECIPROCAL

OONEROUSNEROUS

CCOMMUTATIVEOMMUTATIVE

vsvs..

TTITLEITLE

vsvs..

vsvs..

vsvs..

vsvs..

vsvs..

vsvs..

InnominateInnominate

SolemnSolemn RealReal

UnilateralUnilateral

vsvs..

GratuitiousGratuitious

““Mode”Mode”

AccessoryAccessory

AleatoryAleatory

vsvs..

PrefaratoryPrefaratory

3

SSALESALES versusversus DDONATIONONATION

CCONSENSUAL ONSENSUAL SSOLEMNOLEMN

OONEROUS/NEROUS/

CCOMMUTATIVEOMMUTATIVEGGRATUITOUSRATUITOUS

EESSENCESSENCE: : BBOTH OTH IINVOLVE THE NVOLVE THE TTRANSFER OF RANSFER OF

OOWNERSHIP/WNERSHIP/PPOSSESSION OF OSSESSION OF

SSUBJECT UBJECT MMATTERATTER

((i.e.,i.e., 4 4thth Requisite of Requisite of “Form” for validity)“Form” for validity)

((i.e.,i.e., “Pure Liberality” “Pure Liberality” as consideration)as consideration)

4

SSALES ALES versusversus BBARTERARTER::

BBARTER IS ARTER IS SSALEALE,, BUT WITH THE BUT WITH THE PPRICERICE BEING REPLACED BEING REPLACED

WITH AN WITH AN OOBLIGATION TO BLIGATION TO TTRANSFER RANSFER

OOWNERSHIP/WNERSHIP/PPOSSESSION OF ANOTHER OSSESSION OF ANOTHER

SSUBJECT UBJECT MMATTERATTER

TTHEREFOREHEREFORE: : BBARTER GOVERNED BY ARTER GOVERNED BY LLAW ON AW ON SSALESALES

BBUTUT: N: NOTOT COVEREDCOVERED BYBY S STATUTE OFTATUTE OF F FRAUDSRAUDS

5

SSALESALES versusversus DDACION EN ACION EN PPAGOAGO::

DDACIONACION IS IS PPROCESS OF ROCESS OF EEXTINGUISHMENT OF XTINGUISHMENT OF PPRE-RE-

EEXISTING XISTING OOBLIGATION BLIGATION ((CCONTRACTS)ONTRACTS)

EESSENTIALLYSSENTIALLY: : DDACIONACION GGOVERNEDOVERNED BY BY LLAW ON AW ON SSALESALES

DDACIONACION NOVATESNOVATES THE ORIGINAL CONTRACTUAL THE ORIGINAL CONTRACTUAL

RELATIONS INTO A FULLY EXECUTED RELATIONS INTO A FULLY EXECUTED SSALEALE

(a) There must be delivery of subject matter in lieu of an (a) There must be delivery of subject matter in lieu of an pre-existing obligation;pre-existing obligation;

(b) There must be difference between prestation due and (b) There must be difference between prestation due and what is give in substitute;what is give in substitute;

(c)(c) There must be a clear “meeting of minds” that the There must be a clear “meeting of minds” that the pre-existing obligation is extinguished by reason of pre-existing obligation is extinguished by reason of the prestation substituted.the prestation substituted.

Lo v KJS Eco. Formwork System Phil., Lo v KJS Eco. Formwork System Phil., Inc.,Inc., 413 SCRA 182 (2003) 413 SCRA 182 (2003)

66

SSALES ALES vsvs. . CCONTRACT FOR ONTRACT FOR PPIECE-OF-IECE-OF-WWORKORK::

“Ineluctably, whether the contract be one of sale or one for a Piece of Work, a transfer of ownership is involved and a party necessarily walks away with an object.”

Commission of Internal Revenue v. Court of Appeals, 271 SCRA 605 (1997)

K for Piece-of-Work: ServiceService is the Subject Matter

Although there is the primary obligation to pay fee (or price), the main motivation is the “reputation, skill, mastery” of contractor.

Engineering & Machinery Corp. v. Court of Appeals, 252 SCRA 156 (1996)

BUT: THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FOR

PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT

(ALWAYS A SALE)7

SSALES ALES vsvs. . AAGENCY TO GENCY TO SSELLELL//BBUYUY

AAGENCYGENCY

RREPRESENTATIVEEPRESENTATIVE

FFIDUCIARYIDUCIARY Essentially revocableEssentially revocable Fruits and of principalFruits and of principal

AAGENTGENT

NNOT PERSONNALY LIABLE FOR THE OT PERSONNALY LIABLE FOR THE OOBLIGATION CREATED BY THE BLIGATION CREATED BY THE SSALE ALE CCONTRACTONTRACT

NNOT OBLIGED TO PAY THE OT OBLIGED TO PAY THE PPRICERICE

DDOES NOT ASSUME THE RISKS OF OES NOT ASSUME THE RISKS OF

OOWNERSHIP TO THE WNERSHIP TO THE OOBJECT OF BJECT OF SSALEALE

88

SSALES ALES vsvs. . AAGENCY TO GENCY TO SSELL/ELL/BBUYUY Cont’dCont’d

TTHEREFOREHEREFORE: :

““AAGENT”GENT” is deemed to be Seller/Buyer is deemed to be Seller/Buyer when contracted to assume Risks and when contracted to assume Risks and Obligations contrary to his representative/ Obligations contrary to his representative/ fiduciary role:fiduciary role:

(a) (a) HHE ASSUMES E ASSUMES OOBLIGATION TO PAY THE BLIGATION TO PAY THE PPRICERICE

(b) (b) SSUBJECT UBJECT MMATTERATTER

RRISKS OF ISKS OF LLOSSOSS

IINSURABLE NSURABLE IINTERESTNTEREST

MMAINTENANCEAINTENANCE

9

SSALE ALE versusversus LLEASEEASE::

LLEASE ESSENTIALLY INVOLVES THE EASE ESSENTIALLY INVOLVES THE

TTEMPORARY EMPORARY EENJOYMENT OF NJOYMENT OF PPOSSESSIONOSSESSION OF OF

THE THE SSUBJECT UBJECT MMATTERATTER

TTREATED AS REATED AS SSALE ON ALE ON

IINSTALLMENTSNSTALLMENTS WHEN WHEN LLEASE EASE

SSTRUCTURED IN SUCH A WAY AS TRUCTURED IN SUCH A WAY AS

TO AVOID TO AVOID AAPPLICATION OF THE PPLICATION OF THE

RRECTO ECTO LLAWAW

10

FFEW EW IINSTANCESNSTANCES::

PPARTIES TO A ARTIES TO A SSALEALE (The Essential Element of CONSENT)(The Essential Element of CONSENT)

GGENERAL ENERAL RRULEULE:: All Parties Having Capacity to Contract All Parties Having Capacity to Contract Can Be Valid Parties To a SaleCan Be Valid Parties To a Sale

EXCEPTIONS:

(a)(a) Minors, Demented, Deaf-Mutes – Sale is Voidable Minors, Demented, Deaf-Mutes – Sale is Voidable

- Purchase of Necessaries- Purchase of Necessaries

- Emancipation- Emancipation

(b)(b) Spouses Spouses (Art. 1490)(Art. 1490)

- Sales to Third Parties - Sales to Third Parties – Sale by One Spouse Void– Sale by One Spouse Void- Sales to Each Other - Sales to Each Other – Void– Void

ExceptExcept:: When marriage governed by Complete When marriage governed by Complete Separation of Property RegimeSeparation of Property Regime

By Pre-nuptialsBy Pre-nuptials

By Judicial decreeBy Judicial decree11

OOTHERTHER R RELATIVE ELATIVE DDISQUALIFICATIONSISQUALIFICATIONS (Art. 1491)(Art. 1491)

GuardianGuardian Wards Wards

AgentAgent PrincipalPrincipal

ExceptExcept:: When granted express power When granted express power to buy principal’s propertyto buy principal’s property

Administrator/Administrator/ExecutorExecutor Estate under administrationEstate under administration

Public OfficersPublic Officers Government property under Government property under their jurisdictiontheir jurisdiction

Judges/Justices/Judges/Justices/Court OfficersCourt Officers

Property falling in their jurisdictionProperty falling in their jurisdiction

LawyersLawyers Client’s property in litigationClient’s property in litigation

ExceptExcept:: Contingency fee arrangementContingency fee arrangement

BUT NOTBUT NOT:: Purchase of Inheritance Rights Purchase of Inheritance Rights

12

SSUBJECTUBJECT MMATTERATTER(O(OBLIGATIONBLIGATION to Transfer Ownership and Deliver Possession) to Transfer Ownership and Deliver Possession)

11.. P POSSIBLE OSSIBLE TTHINGHING

22.. L LICITICIT

33. . DDETERMINATEETERMINATE DDETERMINABLEETERMINABLE

vsvs..

vsvs..

vsvs..

Impossible thingsImpossible things

IllicitIllicit

Non-Determinable Non-Determinable

GGENERICSENERICS

RRATIONALEATIONALE:: Transfer of Ownership/Possession of the Transfer of Ownership/Possession of the Subject Matter is the ESSENCE of SALESubject Matter is the ESSENCE of SALE

Obligation should therefore not be illusoryObligation should therefore not be illusory

To comply with the “Obligatory Force” To comply with the “Obligatory Force” principle in Contract Lawprinciple in Contract Law

13

PPRICE & RICE & OOTHER THER CCONSIDERATIONONSIDERATION

(The Obligation to Pay)(The Obligation to Pay)

1.1. R REALEAL/T/TRUERUE vsvs.. FFALSEALSE(Reformation)(Reformation)

vsvs.. SSIMULATEDIMULATED(Void)(Void)

2.2. “ “Money or its EquivalentMoney or its Equivalent” ” vs.vs. P PUREURE vs. vs. NNOMINALOMINAL

VVALUABLE ALUABLE CCONSIDERATIONONSIDERATION L LIBERALITYIBERALITY CCONSIDERATIONONSIDERATION

44. M. MANNER OF PAYMENTANNER OF PAYMENT

vsvs.. UUNASCERTAINABLENASCERTAINABLE

AASCERTAINABLESCERTAINABLE

3.3. CCERTAINERTAIN

RRATIONALEATIONALE:: Must comply with “Obligatory Force” principle in Must comply with “Obligatory Force” principle in Contract LawContract Law

Must meet Must meet OnerousOnerous and and CommutativeCommutativecharacteristics of SALEcharacteristics of SALE

14

UUNASCERTAINABLENASCERTAINABLEvs.vs.

SSTAGES IN TAGES IN LLIFE OF IFE OF SSALEALE

NNEGOTIATIONEGOTIATION

Covers the period from the time the prospective contracting Covers the period from the time the prospective contracting parties indicate interest in the contract up to the time immediate parties indicate interest in the contract up to the time immediate before the contract is perfected.before the contract is perfected.

PPERFECTIONERFECTION

Takes place upon the concurrence of the essential elements Takes place upon the concurrence of the essential elements of the Sale which are: of the Sale which are:

the meeting of the minds of the parties the meeting of the minds of the parties as to the object of the contractas to the object of the contractupon the price. upon the price.

CCONSUMMATIONONSUMMATION

It begins when the parties perform their respective It begins when the parties perform their respective undertaking under the perfected contract of sale, culminating in undertaking under the perfected contract of sale, culminating in the extinguishments thereof. the extinguishments thereof.

Jovan Land, Inc. v. CA, 268 SCRA 160 (1997)

San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)15

PPOLICITACIONOLICITACION SSTAGETAGE

Invitations to make OffersInvitations to make Offers (“Proposals”) (“Proposals”)

OOFFERSFFERS

AACCEPTANCESCCEPTANCES

AAGENCY TOGENCY TO S SELLELL//TOTO B BUYUY

OOPTION PTION CCONTRACTSONTRACTS

RRIGHTS OF IGHTS OF FFIRST IRST RREFUSALEFUSAL

AAGREEMENTS TO GREEMENTS TO EENTER INTO NTER INTO SSERIES OF ERIES OF SSALESALES

MMUTUAL UTUAL PPROMISES ROMISES TTO O BBUY AND UY AND SSELLELL

(Contracts to Sell of the First Type)(Contracts to Sell of the First Type)

16

RULES ON OFFERS:

• Offer is at the complete will of Offeror, who may destroy it at will prior to acceptance

• Will “disappear” or lapse upon the happening of the condition or period placed upon it

• When floated unconditionally, will be extinguished through the passage of reasonable time

• Cannot be accepted partially or even substantially Counter-offer extinguishes original Offer

5. Legal effect of acceptance is taken only from point of view of Offeror

Offeror may still extinguish Offer at any time before he has knowledge of Acceptance

Only a “certain” Offer when met by an “Absolute” Acceptance will give rise to a valid SALE.

17

“CERTAIN” OFFER

(a) CONTAINS A CLEAR PROMISE TO SELL/TO BUY

(b) COVERS A SUBJECT MATTER THAT IS: Possible thing Licit Determinate or Determinable

(c) COVERS A PRICE OR CONSIDERATION Real Valuable Certain or Ascertainable With Manner of Payment/Performance

agreed upon

18

“ABSOLUTE” ACCEPTANCE

(a) NO CONDITION OR AMENDMENT OF THE TERMS OF THE OFFER

(b) MAY CLARIFY

(c) BUT NEVER TOUCH ON THE TERMS/COVERAGE OF SUBJECT MATTER AND TERMS/COVERAGE OF PRICE

19

OOPTION PTION CCONTRACTONTRACT::

AACCEPTANCECCEPTANCE of O of OFFERFFER to give on Option to Buy/to Sellto give on Option to Buy/to Sell

CCONSIDERATIONONSIDERATION:: Anything separate and distinct from Anything separate and distinct from PricePrice

SSUBJECT UBJECT MMATTERATTER:: Option or Privilege to Sell/ Purchase:Option or Privilege to Sell/ Purchase:

AANN O OBJECTBJECT: : AT A AT A PPRICERICE::- Possible Possible -- Real Real- Licit Licit -- Valuable Valuable- Determinate/ Determinate/ -- Certain/ Certain/ Determinable AscertainableDeterminable Ascertainable

20

• If If no separate considerationno separate consideration, Option Contract , Option Contract void, but may constitute void, but may constitute certaincertain Offer which can Offer which can be withdrawn by Offeror, but if accepted before be withdrawn by Offeror, but if accepted before withdrawal would give rise to a valid Sale withdrawal would give rise to a valid Sale ((Sanchez v. RigosSanchez v. Rigos doctrine) doctrine)

• If withdrawal of option/offer whimsical or If withdrawal of option/offer whimsical or arbitrary, could give rise to damage claim under arbitrary, could give rise to damage claim under Art. 19 of Civil CodeArt. 19 of Civil Code

3.3. When there is When there is separate considerationseparate consideration, an , an

Option Contract deemed perfectedOption Contract deemed perfected::

Ang Yu Asuncion v. Court of AppealsAng Yu Asuncion v. Court of Appeals238 SCRA 602 (1994)238 SCRA 602 (1994)

21

(a) (a) If exercised within option period, gives rise If exercised within option period, gives rise to Sale, which can be enforced by specific to Sale, which can be enforced by specific performanceperformance

(b)(b) Would be a breach of the Option Contract, for Would be a breach of the Option Contract, for Offeror to withdraw the offer during the agreed Offeror to withdraw the offer during the agreed period, but withdrawal destroys nevertheless period, but withdrawal destroys nevertheless the Optionthe Option

Ang Yu Asuncion v. Court of AppealsAng Yu Asuncion v. Court of Appeals cont’dcont’d

22

Optionee-Offeree may not sue for specific Optionee-Offeree may not sue for specific performance on the Sale since it has failed performance on the Sale since it has failed to reach its own perfection stageto reach its own perfection stage

Optioner-Offeror, however, renders himself Optioner-Offeror, however, renders himself liable for damages for breach of option liable for damages for breach of option

(c) (c) But if, however, Optioner-Offeror withdraws But if, however, Optioner-Offeror withdraws Offer even during option period before its Offer even during option period before its acceptance (acceptance (i.e.,i.e., exercise): exercise):

RRIGHT OF IGHT OF FFIRST IRST RREFUSALEFUSAL

OOFFEROR BOUNDS HIMSELF TO FIRST FFEROR BOUNDS HIMSELF TO FIRST

OFFER OFFER SSUBJECT UBJECT MMATTER TO ATTER TO OOFFEREE FFEREE

FOR FOR SSALEALE

IIN THE N THE EEVENT VENT OOFFEROR FFEROR EEVER VER DDECIDES ECIDES

TO TO SSELL ELL IITT

SSUBJECT UBJECT MMATTER ATTER

Possible thingPossible thing

LicitLicit

Determinate/DeterminableDeterminate/Determinable

PPRICERICE: : THAT WILL THAT WILL TTHEN (HHEN (HAPPENINGAPPENING OF OF CCONDITIONONDITION) BE ) BE

AAGREED UPONGREED UPON2323

EESSENCESSENCE::

CCONDITIONONDITION::

DDOCTRINES ON OCTRINES ON RRIGHTS OF IGHTS OF FFIRST IRST RREFUSALEFUSAL

Ang Yu Asuncion v. Court of Appeals Ang Yu Asuncion v. Court of Appeals

• Generally, RFRs would be “none” contracts, for Generally, RFRs would be “none” contracts, for lack of cause or consideration, or failure to agree lack of cause or consideration, or failure to agree the valid Price for the expectant contract the valid Price for the expectant contract

• Merely “Merely “innovative juridical relationinnovative juridical relation””

RFRRFR

• CannotCannot be enforced by specific performance be enforced by specific performance

Not being a Contract, it lacks essence of Not being a Contract, it lacks essence of

“consensuality,” “obligatory force” or “mutuality“consensuality,” “obligatory force” or “mutuality””

• Breach allows recovery of damage based on Art. 19 Breach allows recovery of damage based on Art. 19 principle of “principle of “Abuse of right”Abuse of right”

24

Equatorial Realty Dev., Inc. v. Mayfair TheaterEquatorial Realty Dev., Inc. v. Mayfair Theater264 SCRA 483 (1996)264 SCRA 483 (1996)

DDOCTRINES ON OCTRINES ON RFRRFR cont’dcont’d

• When RFR attached to a valid principal contract When RFR attached to a valid principal contract ((e.g.e.g. Lease), its enforcement takes its vitality from Lease), its enforcement takes its vitality from the obligatory force of the principal contractthe obligatory force of the principal contract

• Such RFR, when breached may be enforced, at the Such RFR, when breached may be enforced, at the Price at which Subject Matter sold to Third PartyPrice at which Subject Matter sold to Third Party

• The Third-Party Buyer’s purchase may be The Third-Party Buyer’s purchase may be rescinded under rescinded under accion paulianaaccion pauliana, , i.e., i.e., entered into entered into in breach and in fraud of Optionee’s contractual in breach and in fraud of Optionee’s contractual rightright

25

Parañaque Kings Enterprises v. CAParañaque Kings Enterprises v. CA268 SCRA 727 (1997)268 SCRA 727 (1997)

DDOCTRINES ON OCTRINES ON RFRRFR cont’dcont’d

• RFR is complied with by first offering the Subject RFR is complied with by first offering the Subject Matter to the Optionee and negotiating for a SaleMatter to the Optionee and negotiating for a Sale

There is no obligation to reach a sale, There is no obligation to reach a sale, obligation is to negotiate in good faithobligation is to negotiate in good faith

• Only when negotiations do not ripen into a Sale, Only when negotiations do not ripen into a Sale, can Subject Matter be offered to Third-Party can Subject Matter be offered to Third-Party Buyer, Buyer, but at same price and terms asked of the but at same price and terms asked of the OptioneeOptionee

• Otherwise, must re-offer under new terms to Otherwise, must re-offer under new terms to OptioneeOptionee

26

AAGREEMENTS TO GREEMENTS TO EENTER INTO NTER INTO FFUTURE UTURE SSALE ALE

OR OR SSERIES OF ERIES OF SSALESALES::

- National Grains AuthorityNational Grains Authority v. v. IAC,IAC, 171 SCRA 131 (1989)171 SCRA 131 (1989)

- Johannes Schuback v. Court of Appeals, Johannes Schuback v. Court of Appeals, 227 SCRA 719 (1993) 227 SCRA 719 (1993)

(1) (1) DDISTRIBUTION/ ISTRIBUTION/ SSUPPLY UPPLY AAGREEMENT GREEMENT

27

EESSENCESSENCE::

An Agreement to enter into a series An Agreement to enter into a series of Contracts of Saleof Contracts of Sale

Obligations “to do” To enter into a Obligations “to do” To enter into a Contract of SaleContract of Sale

(2)(2) M MUTUALUTUAL P PROMISESROMISES TOTO B BUYUY ANDAND TOTO S SELLELL

(C(CONTRACTS TO ONTRACTS TO SSELL)ELL)

MMUTUAL UTUAL PPROMISES TO ROMISES TO BBUY AND UY AND SSELLELL(C(CONTRACTS TO ONTRACTS TO SSELL)ELL)

• AAGREEMENTSGREEMENTS TOTO E ENTERNTER INTO INTO CCONTRACTONTRACT OF OF

SSALEALE UPONUPON H HAPPENINGAPPENING OF THEOF THE C CONDITIONSONDITIONS

Essentially, contains Obligations “to do”: Essentially, contains Obligations “to do”: to to enter into a Saleenter into a Sale

22. C. CONDITIONAL ONDITIONAL CCONTRACT OF ONTRACT OF SSALE ALE WHERE THE WHERE THE

BBILATERAL ILATERAL OOBLIGATIONS TO BLIGATIONS TO BBUY AND UY AND SSELL HAVE ELL HAVE

BEEN BEEN AAGREED GREED UUPONPON, BUT , BUT SSUBJECT TO UBJECT TO SSUSPENSIVE USPENSIVE

CCONDITIONONDITION

Condition usually is the full payment of the Condition usually is the full payment of the priceprice

28

PPERFECTION ERFECTION SSTAGETAGE

• PPERFECTION HAPPENS WHEN A “ERFECTION HAPPENS WHEN A “CCERTAIN ERTAIN

OOFFER” HAS BEEN MET BY AN “FFER” HAS BEEN MET BY AN “AABSOLUTE BSOLUTE

AACCEPTANCE”CCEPTANCE”

• TTHE ONLY POINT IN TIME HE ONLY POINT IN TIME TTO O DDETERMINE THE ETERMINE THE

VVALIDITYALIDITY OR OR IINVALIDITY OF A NVALIDITY OF A CCONTRACT OF ONTRACT OF SSALEALE

• EESTABLISHES THE STABLISHES THE CCONTRACTUAL ONTRACTUAL PPRINCIPLES OF:RINCIPLES OF:

CONSENSUALITYCONSENSUALITY

MUTUALITY OR OBLIGATORY FORCEMUTUALITY OR OBLIGATORY FORCE RELATIVITYRELATIVITY

29

““Birth” sets the essence of the SaleBirth” sets the essence of the Sale

FFORM OF ORM OF SSALEALE

GGENERALLYENERALLY:: None, because Sale is None, because Sale is consensualconsensual contractcontract

FFOR OR EENFORCEABILITYNFORCEABILITY:: SSTATUTE OF TATUTE OF FFRAUDSRAUDS

1.1. Sale which by its terms is not to be Sale which by its terms is not to be performed within one (1) year.performed within one (1) year.

2.2. Sale of Movables, at least P500 Sale of Movables, at least P500

33. Sale of Immovables, at any price. Sale of Immovables, at any price

Must be in writing signed by the “party Must be in writing signed by the “party sought to be bound”sought to be bound”

30

FFORM OF ORM OF SSALEALE cont’dcont’d

Memo must contain Description of:Memo must contain Description of:

(a)(a) S SUBJECT UBJECT MMATTERATTER Possible thingPossible thing

LicitLicit

Determinate/Determinate/DeterminableDeterminable

(b)(b) P PRICERICE

realrealvaluablevaluable

certain/ascertainablecertain/ascertainable

manner of payment providedmanner of payment provided

OOR R PPARTIALLY ARTIALLY EEXECUTEDXECUTED (Estoppel) (Estoppel)

OOR R WWAIVER OF AIVER OF AADDUCEMENT OF DDUCEMENT OF OORAL RAL EEVIDENCEVIDENCE AT AT TRIALTRIAL

31

(c)(c) SSIGNED BY THE PARTY SOUGHT TO BE CHARGEDIGNED BY THE PARTY SOUGHT TO BE CHARGED

ExceptionException: Electronic Document: Electronic Document

FORM OF SALE cont’d

What Constitutes “Partial Execution”?What Constitutes “Partial Execution”?

(a)(a) Performance Must Performance Must Touch Upon Touch Upon

Subject MatterSubject Matter

PricePrice

Cannot Cover “Other Cannot Cover “Other Consideration”Consideration”

(b)(b) Must Involve/Compromise “Party Sought to Must Involve/Compromise “Party Sought to be Charged” be Charged”

32

FFORMS THAT ORMS THAT VVOID OID CCONTRACT OF ONTRACT OF SSALE:ALE:

11. . SSALE OF ALE OF RREALTY THROUGH EALTY THROUGH AAGENT:GENT:

AAGENT’S AUTHORITY MUST BE IN GENT’S AUTHORITY MUST BE IN WWRITINGRITING

SSALE ALE VVOIDOID:: - EEVEN IF VEN IF DDEED OF EED OF SSALE IN ALE IN WRITING and/or NOTARIZEDWRITING and/or NOTARIZED

- EEVEN IF THERE HAS BEEN VEN IF THERE HAS BEEN

PPARTIAL/ ARTIAL/ FFULL ULL PPAYMENTAYMENT

- EEVEN IF THERE HAS BEEN VEN IF THERE HAS BEEN

DELIVERY OF DELIVERY OF SSUBJECT UBJECT MMATTERATTER

- EEVEN IF SALE REGISTEREDVEN IF SALE REGISTERED

3333

OOTHERWISETHERWISE::

SSALES OFALES OF I IMMOVABLESMMOVABLES

• PPRIVATE RIVATE DDOCUMENT OCUMENT NNEEDED TO BE EEDED TO BE EENFORCEABLE NFORCEABLE

BBETWEEN ETWEEN PPARTIESARTIES

EEXCEPTXCEPT: : PPARTIAL ARTIAL EEXECUTION/XECUTION/WWAIVERAIVER

2.2. MMUST UST BBE E IIN A N A PPUBLIC UBLIC IINSTRUMENTNSTRUMENT

-TTO O BBIND THE IND THE PPUBLICUBLIC

-TTO O BBE E RREGISTRABLE WITH EGISTRABLE WITH RREGISTRY OFEGISTRY OF D DEEDSEEDS

33. . FFOR OR RREAL EAL EESTATESTATE, , MMUST UST BBE E RREGISTERED TO EGISTERED TO BBE E VVALID ALID

AND AND BBINDING INDING AAGAINST THE GAINST THE WWORDORD

34

- Authority of Agent must be in writingAuthority of Agent must be in writing – VOID – VOID- Bound by actual possession situation, otherwise Bound by actual possession situation, otherwise

not in good faithnot in good faith

CCONSUMMATION ONSUMMATION SSTAGETAGE

EEFFECTS OF FFECTS OF CCONDITIONSONDITIONS

EEXPRESS XPRESS WWARRANTIESARRANTIES

IIMPLIED MPLIED WWARRANTIESARRANTIES

(3)(3) RREMEDIESEMEDIES

(1) PERFORMANCE DELIVERY OF

SUBJECT MATTER

PAYMENT OF PRICE

(5)(5) EEXTINGUISHMENTXTINGUISHMENT

CCONVENTIONAL ONVENTIONAL

RREDEMPTION EDEMPTION (SALE A (SALE A RETRO)RETRO)

EEQUITABLE QUITABLE

MMORTGAGESORTGAGES

LLEGAL EGAL

RREDEMPTIONEDEMPTION

(2)(2) RRISK OF ISK OF LLOSSOSS

(4)(4) CCONDITIONS AND ONDITIONS AND

WWARRANTIESARRANTIES

SSPECIFIC PERFORMANCEPECIFIC PERFORMANCE

RRESCISSIONESCISSION

DDOUBLE OUBLE SSALES ALES RRULEULE SSUBDIVISION LOTS & UBDIVISION LOTS & CCONDO UNITS ONDO UNITS RRULESULES

RRECTO ECTO LLAWAW MMACEDAACEDA LLAWAW

35

OOBLIGATIONS OF BLIGATIONS OF SSELLERELLER

1.1. T TO O PPRESERVERESERVE THE THE TTHINGHING WITH WITH DDILIGENCE OF A ILIGENCE OF A

GGOOD OOD FFATHER OF A ATHER OF A FFAMILYAMILY

2. 2. TTOO DELIVER DELIVER THETHE SUBJECT MATTER SUBJECT MATTER

3. 3. To DTo DELIVER ELIVER FFRUITSRUITS, A, ACCESSORIESCCESSORIES AND AND

AACCESSIONSCCESSIONS

44. To C. To COMPLYOMPLY WITH WITH WWARRANTIESARRANTIES

OOBLIGATIONS OF BLIGATIONS OF BBUYERUYER

1. 1. TTO O PPAY THE AY THE PRICEPRICE

2.2. T TO O AACCEPT CCEPT DDELIVERY OF ELIVERY OF SSUBJECT UBJECT MMATTERATTER

3636

DDELIVERY OF ELIVERY OF SSUBJECT UBJECT MMATTERATTER

TTRADITIONRADITION AS THE AS THE MMODEODE

TO TO TTRANSFER RANSFER OOWNERSHIPWNERSHIP

- Actual or Physical DeliveryActual or Physical Delivery

- Constructive DeliveryConstructive Delivery

37

MMAGICAGIC OFOF TTRADITIONRADITION

Fulfillment of the Primary Fulfillment of the Primary Obligation of the SellerObligation of the Seller

Transfer Ownership/ Transfer Ownership/ Possession to the BuyerPossession to the Buyer

EEXECUTION OF XECUTION OF PPUBLIC UBLIC IINSTRUMENTNSTRUMENT

- No Contrary Stipulation/ IntentionNo Contrary Stipulation/ Intention

- Seller Must Have “Control”Seller Must Have “Control”

- Passage of Reasonable TimePassage of Reasonable Time

EEXCEPTIONXCEPTION: : WWHEN HEN BBUYER UYER TTAKES THE AKES THE RRISKISK

DDOCTRINES ON OCTRINES ON CCONSTRUCTIVE ONSTRUCTIVE DDELIVERYELIVERY

Produces the Same “Produces the Same “MagicMagic” of ” of Actual DeliveryActual Delivery

CCONSTRUCTIVE ONSTRUCTIVE DDELIVERYELIVERY

CCONSTITUTUM ONSTITUTUM PPOSSESORIUMOSSESORIUM

TTRADITIO RADITIO BBREVI REVI MMANUANU

TTRADITIO RADITIO LLONGA ONGA MMANU OR ANU OR SSYMBOLIC DELVERY YMBOLIC DELVERY

39

DDELIVERYELIVERY TTHROUGHHROUGH CCARRIERARRIER

- - FASFAS - FOB- FOB - CIF- CIF

DDOCUMENTSOCUMENTS TOTO T TITLEITLE

DDELIVERYELIVERY FORFOR

IINTANGIBLESNTANGIBLES

Public InstrumentPublic Instrument

Transfer/Negotiation of the “Title” Transfer/Negotiation of the “Title” Evidences the IntangibleEvidences the Intangible

Enjoyment of Rights and Privileges with Enjoyment of Rights and Privileges with the consent of the Sellerthe consent of the Seller

RRULES ON ULES ON DDOUBLE OUBLE SSALES ALES UUNDER NDER AART. RT. 15441544

11. . FFOR OR MMOVABLESOVABLES:: First to Possess, in good faithFirst to Possess, in good faith Oldest Title, in good faithOldest Title, in good faith ThenThen: “: “First in time, priority in rightsFirst in time, priority in rights””

22. . FFOR OR IIMMOVABLESMMOVABLES::

First to Register, in good faithFirst to Register, in good faith

First to Possess, in good faithFirst to Possess, in good faith

Oldest Title, in good faithOldest Title, in good faith

ThenThen: “: “First in time, priority in rightsFirst in time, priority in rights””

40

RREQUISITES FOR EQUISITES FOR AART. RT. 15441544 TO TO AAPPLYPPLYCheng v. Genato,Cheng v. Genato, 300 SCRA 722 (1998300 SCRA 722 (1998))

(a)(a) The two (or more) sales transactions must The two (or more) sales transactions must constitute constitute validvalid Sales; Sales;

(b)(b) The two (or more) sales transactions must pertain The two (or more) sales transactions must pertain to to exactly the sameexactly the same Subject Matter; Subject Matter;

(c)(c) The two (or more) Buyers at odds over the rightful The two (or more) Buyers at odds over the rightful ownership of the Subject Matter must each ownership of the Subject Matter must each represent conflicting interests; andrepresent conflicting interests; and

(d)(d) The two (or more) Buyers at odds over the rightful The two (or more) Buyers at odds over the rightful ownership of the Subject Matter mustownership of the Subject Matter must each have each have bought from bought from the very samethe very same Seller Seller

Consolidated Rural Bank (Cagayan ValleyConsolidated Rural Bank (Cagayan Valley),), Inc. v. CA, Inc. v. CA, 448 448 SCRA 347 (2005)SCRA 347 (2005)

41

EEFFECTS OF FFECTS OF AART. RT. 15441544 RREQUISITESEQUISITES

Not applicable where one of the Not applicable where one of the Sales is VoidSales is Void

Not applicable to Contracts to SellNot applicable to Contracts to Sell

Not applicable if first sale is the Not applicable if first sale is the Subject Matter and the second sale Subject Matter and the second sale is the redemption right to the is the redemption right to the Subject MatterSubject Matter

42

DDOCTRINES ON OCTRINES ON AART. RT. 15441544 DDOUBLE OUBLE SSALES ALES RRULESULES

(a)(a) Rules under Art. 1544 are addressed to the Rules under Art. 1544 are addressed to the Second Buyer, who is mandated to do Second Buyer, who is mandated to do positive things if he hopes to win at allpositive things if he hopes to win at all

Carbonell v. CACarbonell v. CA, 69 SCRA 99 (1976), 69 SCRA 99 (1976)Uraca v. CA,Uraca v. CA, 278 SCRA 702 (1997) 278 SCRA 702 (1997)

Consolidated Rural Bank (Cagayan Valley), Inc. v. CAConsolidated Rural Bank (Cagayan Valley), Inc. v. CA, , 448 SCRA 347 (2005)448 SCRA 347 (2005)

First Buyer wins by being first (first in First Buyer wins by being first (first in time) and does not need the benefits time) and does not need the benefits of Art. 1544of Art. 1544

43

DDOCTRINES ON OCTRINES ON AART. RT. 15441544 cont’dcont’d

(b)(b) First Buyer wins by virtue of greater First Buyer wins by virtue of greater doctrine of “doctrine of “first in time, priority in rightsfirst in time, priority in rights””

(c)(c) Second Buyer must register his purchase Second Buyer must register his purchase while in good faith if he hopes to win:while in good faith if he hopes to win:

(d)(d) First Buyer, who is always in good faith, First Buyer, who is always in good faith, when he registers ahead, wins became when he registers ahead, wins became second buyer in hopelesssecond buyer in hopeless

(e) Even if Second Buyer was first to possess (e) Even if Second Buyer was first to possess in good faith, the subsequent registration in good faith, the subsequent registration by First Buyer prevailsby First Buyer prevails

Tañedo v. CA, Tañedo v. CA, 252 SCRA 80 (1996252 SCRA 80 (1996))

4444

(f)(f) Knowledge of the First Buyer of the Knowledge of the First Buyer of the second sale does not adversely affect second sale does not adversely affect First Buyer, nor does it constitute First Buyer, nor does it constitute registration in favor of the Second Buyerregistration in favor of the Second Buyer

(g)(g) However, knowledge of the Second Buyer However, knowledge of the Second Buyer of the first sale, would place him not only of the first sale, would place him not only in bad faith, but would constitute in bad faith, but would constitute registration in favor of the First Buyerregistration in favor of the First Buyer

Cruz v. Cabana, Cruz v. Cabana, 129 SCRA 656 (1984)129 SCRA 656 (1984)

45


(h)(h) It seems that Second Buyer must have It seems that Second Buyer must have paid in full the Price to gain the benefit paid in full the Price to gain the benefit under Art. 1544, as the Court defines the under Art. 1544, as the Court defines the meaning of “good faith” to include meaning of “good faith” to include having paid full valuehaving paid full value

Heirs of Aguilar-Reyes v. Spouses Mijares,Heirs of Aguilar-Reyes v. Spouses Mijares, 410 SCRA 97 (2003) 410 SCRA 97 (2003)

Tanongon v. SamsonTanongon v. Samson, 382 SCRA 130 (2002), 382 SCRA 130 (2002)

Balatbat v. CABalatbat v. CA, 261 SCRA 128 (1996), 261 SCRA 128 (1996)

Agricultural and Home Extension Dev. v. CAAgricultural and Home Extension Dev. v. CA, 213 SCRA 536 (1992), 213 SCRA 536 (1992)

4646


GGLOBAL LOBAL RRULES ON ULES ON DDOUBLE OUBLE SSALE FOR ALE FOR RREAL EAL EESTATESTATE

I.I. First to Register, in Good Faith and for Value, his First to Register, in Good Faith and for Value, his Purchase of Land registered under the Torrens Purchase of Land registered under the Torrens System wins, for registration is the “Operative System wins, for registration is the “Operative Act” (Does not matter whether he is First or Act” (Does not matter whether he is First or Second Buyer)Second Buyer)

II.II. For Unregistered Land, as between a For Unregistered Land, as between a conventional prior purchase, and a second conventional prior purchase, and a second purchase at public auction, the first purchase at public auction, the first Conventional Buyer wins, since the Buyer at Conventional Buyer wins, since the Buyer at public sale is bound by the provisions of the public sale is bound by the provisions of the Rules of Court that says he only takes whatever Rules of Court that says he only takes whatever is the remaining title of the judgment debtor.is the remaining title of the judgment debtor.

47

• The Rules of Double Sale under Art. 1544 shall The Rules of Double Sale under Art. 1544 shall apply, only when the requisites under apply, only when the requisites under Cheng v. Cheng v. Genato Genato are present, as follows:are present, as follows:

1.1. First to Register in good faithFirst to Register in good faith

But this can only apply to unregistered But this can only apply to unregistered land, because Rule I applies to registered land, because Rule I applies to registered land.land.

2.2. First to Possess in good faith, orFirst to Possess in good faith, or

3.3. Oldest Title, in good faithOldest Title, in good faith

• ““First in time, priority in rights” First in time, priority in rights” applies lastapplies last

48

GGLOBAL LOBAL RRULES ON ULES ON DDOUBLE OUBLE SSALE ALE cont’dcont’d

SSALE AND ALE AND DDELIVERY BY ELIVERY BY NNON-OWNERON-OWNER

GGENERAL ENERAL RRULEULE: : Nemo Dat Quod Non HabetNemo Dat Quod Non Habet

SSPECIAL PECIAL RRULES:ULES:

• Sale and Delivery, with subsequent Sale and Delivery, with subsequent acquisition of title by owner (Art. 1434), acquisition of title by owner (Art. 1434), ipso ipso jurejure transfers title to Buyer transfers title to Buyer

• Sale by Co-OwnerSale by Co-Owner

- - particular portionparticular portion

- whole property- whole property

5.5. Estoppel on the Part of the True Owner (Art. 1426)Estoppel on the Part of the True Owner (Art. 1426)

49

• ““Chain of Title TheoryChain of Title Theory” under the Torrens ” under the Torrens

SystemSystem

• Sales by Court AuthoritySales by Court Authority

• Sales in Merchant StoresSales in Merchant Stores

• Sales by One Having Voidable Title Prior Sales by One Having Voidable Title Prior

to Annulmentto Annulment

• Sale under Documents of TitleSale under Documents of Title

SSALE AND ALE AND DDELIVERY BY ELIVERY BY NNON-OWNERON-OWNER cont’dcont’d

50

RRULES FOR ULES FOR DDETERIORATION, ETERIORATION, FFRUITS RUITS

AND AND IIMPROVEMENTSMPROVEMENTS

RRULES HAVE NO APPLICATION IS SUBJECT ULES HAVE NO APPLICATION IS SUBJECT MATTER IS MERELY DETERMINABLE (Art. 1263)MATTER IS MERELY DETERMINABLE (Art. 1263)

RROMAN OMAN LLAW AW DDOCTRINEOCTRINE: : Buyer bears the Buyer bears the consequences of consequences of Deterioration, but Deterioration, but benefits from the Fruits benefits from the Fruits and Improvementsand Improvements

Arts. 1480, 1163-1262Arts. 1480, 1163-1262Arts. 1189, 1537 and 1538Arts. 1189, 1537 and 1538

5151

RRULES WHEN ULES WHEN SSUBJECT UBJECT MMATTER ATTER LLOSTOST: :

11. . BBEFORE EFORE PPERFECTIONERFECTION: : Res Perit DominoRes Perit Domino Roman v. GrimaltRoman v. Grimalt, 6 Phil. 96 (1906), 6 Phil. 96 (1906)

22. A. ATT T TIME OFIME OF P PERFECTIONERFECTION: Seller : Seller (Arts. 1493 and 1494)(Arts. 1493 and 1494)

““Sale is rendered inefficacious”Sale is rendered inefficacious”

5252

General RuleGeneral Rule: : For Goods, risk borne by Seller For Goods, risk borne by Seller under under Res perit dominoRes perit domino rule rule

Chrysler Phil. v. CA,Chrysler Phil. v. CA, 133 SCRA 567 (1984) 133 SCRA 567 (1984)Union Motor Corp v. CAUnion Motor Corp v. CA, 361 SCRA 506 (2001), 361 SCRA 506 (2001)

Loss by Fault of a PartyLoss by Fault of a Party (Arts. 1480, 1504, 1538)(Arts. 1480, 1504, 1538)

LLOSSOSS BYBY F FORTUITOUSORTUITOUS E EVENTVENT: : Two Schools of Two Schools of ThoughtThought

Arts. 1480, 1163, 1164, 1165Arts. 1480, 1163, 1164, 1165

Arts. 1504, 1538, and 1189Arts. 1504, 1538, and 1189

SSUBJECT MATTER LOST:UBJECT MATTER LOST: cont’dcont’d

53

33. A. AFTERFTER P PERFECTIONERFECTION BUTBUT B BEFOREEFORE D DELIVERYELIVERY Arts. 1164, 1189, and 1262Arts. 1164, 1189, and 1262((

SSUBJECT MATTER LOST:UBJECT MATTER LOST: cont’dcont’d

44. A. AFTERFTER D DELIVERYELIVERY: B: BUYER BEARS RISKUYER BEARS RISK, , UNDERUNDER Res Perit DominoRes Perit Domino

Art. 1504Art. 1504Song Fo & Co. v. OriaSong Fo & Co. v. Oria, 33 Phil. 3 (1915), 33 Phil. 3 (1915)

Lawyer's Coop v. TaboraLawyer's Coop v. Tabora, 13 SCRA 762 (1965), 13 SCRA 762 (1965)Lawyer's Coop v. NarcisoLawyer's Coop v. Narciso, 55 O.G. 3313), 55 O.G. 3313)

EEXCEPTXCEPT:: When retention of Possession by When retention of Possession by Seller for purpose of securing Seller for purpose of securing payment of the Purchase Pricepayment of the Purchase Price

5454

RREMEDIES FOR EMEDIES FOR CCONTRACTS OF ONTRACTS OF SSALEALE

1.1. RREMEDIES OF “EMEDIES OF “UUNPAID NPAID SSELLER” OF ELLER” OF GGOODSOODS

•• Possessory lien Possessory lien (Arts. 1526-1529, 1503, 1535)(Arts. 1526-1529, 1503, 1535)

•• Stoppage Stoppage in transituin transitu (Arts. 1530-1532, 1535, 1636[2])(Arts. 1530-1532, 1535, 1636[2])

•• Special Right of Resale Special Right of Resale (Art. 1533)(Art. 1533)

•• Special Right to Rescind Special Right to Rescind (Art. 1534)(Art. 1534)

5555

2. 2. RRECTO ECTO LLAW:AW: SSALES OF ALES OF MMOVABLES ON OVABLES ON IINSTALLMENTSNSTALLMENTS

(a)(a) Meaning of “Installment Sale”Meaning of “Installment Sale” Levy v. GervacioLevy v. Gervacio, 69 Phil. 52 (1939), 69 Phil. 52 (1939)

(b)(b) Contracts to Sell Movables Not CoveredContracts to Sell Movables Not Covered Visayan Sawmill Co., Visayan Sawmill Co., Inc. v. CA Inc. v. CA, 219 SCRA 378 (1993), 219 SCRA 378 (1993)

(c)(c) Nature of Remedies of Unpaid Seller Nature of Remedies of Unpaid Seller

Remedies under Art. 1484 are not cumulative, but Remedies under Art. 1484 are not cumulative, but alternative and exclusive.alternative and exclusive.

Borbon II v. Servicewide Specialists, Inc., Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996)258 SCRA 634 (1996)

Seeking a writ of replevin consistent with all three Seeking a writ of replevin consistent with all three

remediesremedies Universal Motors Corp. v. Dy Hian Tat,Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 (1969) 28 SCRA 161 (1969)

5656

(d)(d) R REMEDY OF EMEDY OF SSPECIFIC PECIFIC PPERFORMANCEERFORMANCE: No bar to full : No bar to full recoveryrecovery

Tajanglangit v. Southern MotorsTajanglangit v. Southern Motors, 101 Phil. 606 (1957), 101 Phil. 606 (1957)

RRECTO ECTO LLAW:AW: cont’dcont’d

Even when it is mortgaged property that is Even when it is mortgaged property that is sold on execution.sold on execution.

Southern Motors v. Moscoso, Southern Motors v. Moscoso, 2 SCRA 168 (1961)2 SCRA 168 (1961)

Even with replevin and recovery of the Even with replevin and recovery of the subject property, the action may still be for subject property, the action may still be for specific performance.specific performance.

Industrial Finance Corp. v. Ramirez,Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977) 77 SCRA 152 (1977)

5757

(e)(e) NNATURE OF ATURE OF RREMEDYEMEDY OF OF RRESCISSIONESCISSION

RRECTO ECTO LLAW:AW: cont’dcont’d

• Inherent “Barring” Effect of RescissionInherent “Barring” Effect of Rescission

• Surrender of mortgaged property not Surrender of mortgaged property not equivalent to rescission. equivalent to rescission.

Vda. de Quiambao v. Manila Motors Co., Inc.,Vda. de Quiambao v. Manila Motors Co., Inc.,

3 SCRA 444 (1961)3 SCRA 444 (1961)

• Stipulation on non-return of payments Stipulation on non-return of payments is valid provided not unconscionable.is valid provided not unconscionable.

Delta Motor Sales Corp. v. Niu Kim DuanDelta Motor Sales Corp. v. Niu Kim Duan, , 213 SCRA 259 (1992)213 SCRA 259 (1992)

58

(f)(f) RREMEDY OF EMEDY OF FFORECLOSUREORECLOSURE

RRECTO ECTO LLAWAW: : cont’dcont’d

(i)(i) Third Party MortgageThird Party Mortgage Ridad v. Filipinas InvestmentRidad v. Filipinas Investment, 120 SCRA 246 (1983), 120 SCRA 246 (1983)

(ii)(ii) Assignor-Assignee; Financing TransactionsAssignor-Assignee; Financing TransactionsZayas v. Luneta MotorsZayas v. Luneta Motors, 117 SCRA 726 (1982), 117 SCRA 726 (1982)

When seller assigns his credit to another, When seller assigns his credit to another, the assignee is likewise bound by the terms of the assignee is likewise bound by the terms of the Recto Law. the Recto Law.

Borbon II v. Servicewide Specialists, Inc., Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).258 SCRA 634 (1996).

5959

(iii)(iii) H-V “Barring” Effects of ForeclosureH-V “Barring” Effects of Foreclosure

Foreclosure on the chattel mortgage Foreclosure on the chattel mortgage prevents further action on the supporting prevents further action on the supporting real estate mortgage.real estate mortgage.

Cruz v. Filipinas Investment & Finance Corp.,Cruz v. Filipinas Investment & Finance Corp.,23 SCRA 791 (1968)23 SCRA 791 (1968)

Borbon II v. Servicewide Specialists, Inc.,Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996) 258 SCRA 634 (1996)


(iv)(iv) Amounts Barred from RecoveryAmounts Barred from RecoveryMacondray & Co. v. Eustaquio, Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937)64 Phil. 446 (1937)

(v)(v) Perverse BuyerPerverse BuyerFilipinas Investment & Finance Corp. v. Ridad, Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564 (1969)30 SCRA 564 (1969)

6060

(g)(g) PPURPORTED URPORTED LLEASE WITH EASE WITH OOPTION TO PTION TO BBUY:UY:

““Contracts purporting to be leases of personal property Contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thingof the possession or enjoyment of the thing.”.” (Art. 1485)(Art. 1485)


When purported Lessor takes possession of When purported Lessor takes possession of subject movable, it is treated legally as a foreclosure subject movable, it is treated legally as a foreclosure and the barring effects applicable to foreclosure and the barring effects applicable to foreclosure remedy, not rescission, are given application.remedy, not rescission, are given application.

Vda. de Jose v. Barrueco, Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)67 Phil. 191 (1939) Filinvest Credit Corp. v. CA, Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)178 SCRA 188 (1989)

U.S. Commercial v. Halili, U.S. Commercial v. Halili, 93 Phil. 271 (1953)93 Phil. 271 (1953)H.E. Heacock v. Bantal Manufacturing, H.E. Heacock v. Bantal Manufacturing, 66 Phil. 245 (1938)66 Phil. 245 (1938)

Manila Gas Corp. v. Calupita, Manila Gas Corp. v. Calupita, 66 Phil. 747 (19 38)66 Phil. 747 (19 38)Vda. de Jose v. Barrueco, Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)67 Phil. 191 (1939)

6161

3.3. MMACEDA ACEDA LLAWAW: : SSALES OF ALES OF RRESIDENTIAL ESIDENTIAL RREALTY EALTY ON ON IINSTALLMENTSNSTALLMENTS ((RR..AA. . 65526552))

(a)(a) “Role” of Maceda Law “Role” of Maceda LawLagandaon v. CALagandaon v. CA, 290 SCRA 463 (1998), 290 SCRA 463 (1998)

BBUT UT SSEEEE:: People’s Ind’l and Comm. Corp. v. CA, People’s Ind’l and Comm. Corp. v. CA, 281 SCRA 206 (1997)281 SCRA 206 (1997)

(b)(b) Transactions Covered Transactions Covered

The formal requirements of rescission The formal requirements of rescission under the Maceda Law apply even to contracts under the Maceda Law apply even to contracts entered into prior to its effectivity.entered into prior to its effectivity.

Siska Dev. Corp. v. Office of the PresidentSiska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994), 231 SCRA 674 (1994)

62

The Maceda Law makes no distinctions The Maceda Law makes no distinctions between “option” and “sale” which under P.D. between “option” and “sale” which under P.D. 957 also includes “an exchange or attempt to sell, 957 also includes “an exchange or attempt to sell, an option of sale or purchase, a solicitation of a an option of sale or purchase, a solicitation of a sale or an offer to sell directly.”sale or an offer to sell directly.”

Realty Exchange Venture Corp. v. SendinoRealty Exchange Venture Corp. v. Sendino, 233 SCRA 665 (1994), 233 SCRA 665 (1994)

MMACEDA ACEDA LLAWAW cont’dcont’d

6363

CuriouslyCuriously:: No application to Contract to Sell No application to Contract to Sell “because said law presupposes the “because said law presupposes the existence of a valid and effective existence of a valid and effective contract to sell a condominium.”contract to sell a condominium.”

Mortel v. KASSCO, Inc., Mortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000)348 SCRA 391, 398 (2000)


Pursuant to Art. 1253 of Civil Code, in a contract Pursuant to Art. 1253 of Civil Code, in a contract involving installments with interest chargeable against the involving installments with interest chargeable against the remaining balance of the obligation, it is the duty of the remaining balance of the obligation, it is the duty of the creditor-seller to inform the debtor-buyer of the interest that creditor-seller to inform the debtor-buyer of the interest that falls due and that is applying the installment payments to falls due and that is applying the installment payments to cover said interest. Otherwise, the creditor cannot apply the cover said interest. Otherwise, the creditor cannot apply the payments to the interest and then hold the debtor in default for payments to the interest and then hold the debtor in default for non-payment of installments on the principal.non-payment of installments on the principal.

Rapanut v. CA,Rapanut v. CA, 246 SCRA 323 (1995) 246 SCRA 323 (1995)

(c)(c) How Cancellation of Contract Can Be Effected:How Cancellation of Contract Can Be Effected:

Active Realty & Dev. Corp. v. Daroya, Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002)382 SCRA 152 (2002)

64


(a) (a) To sell/assign his rights to another personTo sell/assign his rights to another person

(b)(b) To reinstate contract by updating account To reinstate contract by updating account during grace period, before actual during grace period, before actual cancellation of contract cancellation of contract

(c)(c) To pay in advance installments or in full To pay in advance installments or in full unpaid balance of Price any time without unpaid balance of Price any time without interest and have same annotated in titleinterest and have same annotated in title

Any stipulation in any contract entered Any stipulation in any contract entered into contrary to the provisions of the Law, into contrary to the provisions of the Law, shall be null and void. shall be null and void. (Art. 7)(Art. 7)

6565

OOTHERTHER R RIGHTSIGHTS G GRANTED TO RANTED TO BBUYERUYER

4. 4. OOTHER THER RREMEDIES ON EMEDIES ON SSALE OF ALE OF RREAL EAL EESTATESTATE

(a)(a) A ANTICIPATORY NTICIPATORY BBREACH (ART. 1591)REACH (ART. 1591)

(b)(b) R RESCISSION ON ESCISSION ON SSALE ON ALE ON NNON-ON-

RRESIDENTIAL ESIDENTIAL RREALTY ON EALTY ON

IINSTALLMENTS (Arts. 1191 and 1592)NSTALLMENTS (Arts. 1191 and 1592)

(c)(c) SSEC. 23 AND 24, EC. 23 AND 24, PPRES. RES. DDECREE 957ECREE 957

6666

CCONTRACTS TO ONTRACTS TO SSELL ELL VersusVersus

CCONDITIONALONDITIONAL CCONTRACTS OF ONTRACTS OF SSALEALE

Art. 1458 Defines a Sale to covered both Art. 1458 Defines a Sale to covered both “Absolute and Conditional”“Absolute and Conditional”

Both Contracts are usually bound by same Both Contracts are usually bound by same condition: Full payment of the Pricecondition: Full payment of the Price

Both Contracts are consensual, onerous, Both Contracts are consensual, onerous, commutative, and cover bilateral commutative, and cover bilateral obligationsobligations

67

KK TO TO SSELL ELL VS.VS. KK OF OF SSALEALE cont’dcont’d

Power to Rescind is inherently JudicialPower to Rescind is inherently Judicial

Non-fulfillment of Condition Non-fulfillment of Condition ipso jureipso jure destroys contractdestroys contract

Substantial Breach Relevant to Contract of Substantial Breach Relevant to Contract of Sale, Irrelevant to Contracts to SellSale, Irrelevant to Contracts to Sell

Rescission requires a positive actRescission requires a positive act

68


1.1. In Contract to Sell Ownership if Reserved by In Contract to Sell Ownership if Reserved by Seller, while in a Contract to Sell ownership Seller, while in a Contract to Sell ownership transfers to Buyer upon delivery.transfers to Buyer upon delivery.

Ergo:Ergo: K to Sell must have express K to Sell must have express reservation of ownershipreservation of ownership

• To execute a formal Deed of SaleTo execute a formal Deed of Sale

• Only receipt of payment evidences saleOnly receipt of payment evidences sale

• Seller retained original titlesSeller retained original titles

69


2. “Rescission” of Contract to Sell is a matter 2. “Rescission” of Contract to Sell is a matter of right upon non-happening of the of right upon non-happening of the conditioncondition

Ergo:Ergo: K to Sell must have express K to Sell must have express right to rescind the contract right to rescind the contract upon default of the Buyerupon default of the Buyer

A written notice of “cancellation” must be served A written notice of “cancellation” must be served upon Buyer even when Contract to Sellupon Buyer even when Contract to Sell

UP v. Delos AngelesUP v. Delos Angeles, 35 SCRA 103 (1970), 35 SCRA 103 (1970)

7070

CCONDITIONS ONDITIONS versusversus WWARRANTIESARRANTIES

Power Commercial and Industrial Corp. v. CAPower Commercial and Industrial Corp. v. CA274 SCRA 597 (1997) 274 SCRA 597 (1997)

(a)(a) Condition goes into root of existence of obligation, Condition goes into root of existence of obligation, whereas warranty goes into performance of such whereas warranty goes into performance of such obligation, and in fact may constitute an obligation obligation, and in fact may constitute an obligation itselfitself;;

(b)(b) Condition must be expressly stipulated by parties, Condition must be expressly stipulated by parties, while warranty may form part of the obligation or while warranty may form part of the obligation or contract by provision of law, without previous contract by provision of law, without previous agreementagreement; and; and

(c)(c) Condition may attach itself either to the Obligations Condition may attach itself either to the Obligations of Seller, while warranty, express or implied, relates of Seller, while warranty, express or implied, relates to the Subject Matter itself or to the obligations of to the Subject Matter itself or to the obligations of Seller as to Subject Matter of the saleSeller as to Subject Matter of the sale..

7171

CCONDITIONS AND ONDITIONS AND WWARRANTIESARRANTIES cont’dcont’d

In a “Sale with Assumption of Mortgage,” the In a “Sale with Assumption of Mortgage,” the assumption of mortgage is a condition to the seller’s consent assumption of mortgage is a condition to the seller’s consent so that without approval by the mortgagee, no sale is so that without approval by the mortgagee, no sale is perfected. In such case, the seller remains the owner and perfected. In such case, the seller remains the owner and mortgagor of the property and retains the right to redeem the mortgagor of the property and retains the right to redeem the foreclosed property.foreclosed property.

Ramos v. CARamos v. CA, 279 SCRA 118 (1997), 279 SCRA 118 (1997)

Failure to comply with condition imposed upon perfection Failure to comply with condition imposed upon perfection of the contract results in failure of a contract, while the of the contract results in failure of a contract, while the failure to comply with a condition imposed on the failure to comply with a condition imposed on the performance of an obligation only gives the other party the performance of an obligation only gives the other party the option either to refuse to proceed with sale or waive the option either to refuse to proceed with sale or waive the conditioncondition..

Laforteza v. Machuca, Laforteza v. Machuca, 333 SCRA 643 (2000)333 SCRA 643 (2000)

7272

AA. . EEXPRESS XPRESS WWARRANTIESARRANTIES (Art. 1546)(Art. 1546)

The law allows considerable latitude to seller’s The law allows considerable latitude to seller’s statements, or dealer’s talk; and experience teaches statements, or dealer’s talk; and experience teaches that it is exceedingly risky to accept it at its face value.that it is exceedingly risky to accept it at its face value.

Ramos v. CARamos v. CA, 279 SCRA 118 (1997), 279 SCRA 118 (1997)


(a) Must be an (a) Must be an affirmation of factaffirmation of fact or or any promiseany promise by the by the seller relating to Subject Matter of the sale;seller relating to Subject Matter of the sale;

(b) The (b) The natural tendencynatural tendency of such affirmation or promise of such affirmation or promise is is to induce Buyer to purchaseto induce Buyer to purchase the thing; and the thing; and

(c) Buyer purchases the thing relying on such (c) Buyer purchases the thing relying on such affirmation or promise thereon.affirmation or promise thereon.

7373

BB. . IIMPLIED MPLIED WWARRANTIESARRANTIES (Art. 1547)(Art. 1547)

11. S. SELLER ELLER HHAS AS RRIGHT TO IGHT TO SSELLELL

22. . WWARRANTY ARRANTY AAGAINST GAINST EEVICTIONVICTION

Seller must be summoned in the suit for eviction at Seller must be summoned in the suit for eviction at the instance of the buyer (Art. 1558), and be made a co-the instance of the buyer (Art. 1558), and be made a co-defendant (Art. 1559); or made a third-party defendant.defendant (Art. 1559); or made a third-party defendant.

Escaler v. CA,Escaler v. CA, 138 SCRA 1 (1985) 138 SCRA 1 (1985)

Canizares Tiana v. TorrejosCanizares Tiana v. Torrejos, 21 Phil. 127 (1911), 21 Phil. 127 (1911)

J.M. Tuazon v. CAJ.M. Tuazon v. CA, 94 SCRA 413 (1979), 94 SCRA 413 (1979)


74

33. . WWARRANTY ARRANTY AAGAINST GAINST NNON-ON-AAPPARENT PPARENT

SSERVITUDESERVITUDES


44. . WWARRANTY ARRANTY AAGAINST GAINST HHIDDEN IDDEN DDEFECTSEFECTS

The stipulation in a contract of lease with option to The stipulation in a contract of lease with option to purchase (which it treated as a sale of movable on purchase (which it treated as a sale of movable on installments) that the buyer-lessee "absolutely releases installments) that the buyer-lessee "absolutely releases the lessor from any liability whatsoever as to any and the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with all matters in relation to warranty in accordance with the provisions hereinafter stipulated," was held as an the provisions hereinafter stipulated," was held as an express waiver of warranty against hidden defect.express waiver of warranty against hidden defect.

Filinvest Credit Corp. v. CA, Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)178 SCRA 188 (1989)

75

A hidden defect is one which is unknown or could not A hidden defect is one which is unknown or could not have been known to the buyer. Under the law, the requisites have been known to the buyer. Under the law, the requisites to recover on account of hidden defects are as follows:to recover on account of hidden defects are as follows:


a.a. Defect must be hidden;Defect must be hidden;

b.b. Must exist at the time the sale was made; Must exist at the time the sale was made;

c.c. Must ordinarily have been excluded from the contract; Must ordinarily have been excluded from the contract;

d.d. Defect, must be important (render the thing unfit or Defect, must be important (render the thing unfit or considerably decreases fitness);considerably decreases fitness);

e.e. Action must be instituted within statute of limitations.Action must be instituted within statute of limitations.

Investments & Dev., Inc. v. CA, Investments & Dev., Inc. v. CA, 162 SCRA 636 [1988]162 SCRA 636 [1988]7676

Nutrimix Feeds Corp. v. CANutrimix Feeds Corp. v. CA441 SCRA 357 (2004)441 SCRA 357 (2004)

The remedy against violation of warranty against hidden The remedy against violation of warranty against hidden defects is either to withdraw from the contract (defects is either to withdraw from the contract (accion accion redhibitoriaredhibitoria) or to demand a proportionate reduction of the ) or to demand a proportionate reduction of the price (price (accion quanti minorisaccion quanti minoris), with damages in either case.), with damages in either case.


66. . IIMPLIED MPLIED WWARRANTIES IN THE ARRANTIES IN THE SSALE OF ALE OF GGOODSOODS

a.a. Warranty as to Fitness or QualityWarranty as to Fitness or Quality

b.b. Sale of Goods by SampleSale of Goods by Sample

77. A. ADDITIONAL DDITIONAL WWARRANTIES FOR ARRANTIES FOR CCONSUMER ONSUMER PPRODUCTSRODUCTS(Arts. 68, Consumer Act of the Philippines, R.A. 7394).(Arts. 68, Consumer Act of the Philippines, R.A. 7394).

5.5. R REDHIBITORYEDHIBITORY D DEFECTSEFECTS OFOF A ANIMALSNIMALS

a. Sale of a Teama. Sale of a Team

b. Animals Sold at Fairs or Public Auction b. Animals Sold at Fairs or Public Auction

c. Sale of Animals with Contagious Diseases c. Sale of Animals with Contagious Diseases

d. Sale of Unfit Animals d. Sale of Unfit Animals

77


C.C. EEFFECTS OF FFECTS OF WWARRANTIESARRANTIES

D.D. EEFFECTS OF FFECTS OF WWAIVERSAIVERS

GG. B. BUYER'S UYER'S OOPTIONS IN PTIONS IN CCASE OF ASE OF BBREACH REACH OOF F WWARRANTYARRANTY

78

EEXTINGUISHMENT OF XTINGUISHMENT OF SSALEALE

SSALE ALE EEXTINGUISHED BY XTINGUISHED BY SSAME AME MMODES ODES AAPPLICABLE TO PPLICABLE TO AALL LL CCONTRACTSONTRACTS

Arts. 1231, 1600Arts. 1231, 1600

“ “RREDEMPTION” IS A MODE OF EDEMPTION” IS A MODE OF EXTINGUISHMENT UNIQUE TO EXTINGUISHMENT UNIQUE TO SSALES:ALES:

CCONVENTIONAL ONVENTIONAL RREDEMPTION: EDEMPTION: SSALE ALE WITH WITH RRIGHT TO IGHT TO RREPURCHASEEPURCHASE

LLEGAL EGAL RREDEMPTIONEDEMPTION

79

NNATURE OF ATURE OF RRIGHT TO IGHT TO RREPURCHASE:EPURCHASE:

CCONVENTIONAL ONVENTIONAL RREDEMPTIONEDEMPTION((SSALE WITH A ALE WITH A RRIGHT TO IGHT TO RREPURCHASEEPURCHASE))

Reserved by Seller at the point of Reserved by Seller at the point of Perfection.Perfection.

Art. 1601Art. 1601

Villarica v. CAVillarica v. CA, 26 SCRA 189 (1968), 26 SCRA 189 (1968)

Even though found in a separate Even though found in a separate instrument instrument

Torres v. CATorres v. CA, 216 SCRA 287 (1992), 216 SCRA 287 (1992)

Claravall v. CA,Claravall v. CA, 190 SCRA 439 (1990) 190 SCRA 439 (1990)

80

IIts Validity is Tied to the Validity of the Contract ts Validity is Tied to the Validity of the Contract of Sale to which appended.of Sale to which appended.

Nool v. Court of AppealsNool v. Court of Appeals, 276 SCRA 149 (1997), 276 SCRA 149 (1997)

When Sale Covered by Deed, Right When Sale Covered by Deed, Right a retro a retro may may be proved by parol evidence.be proved by parol evidence.

Mactan Cebu Int’l Airport Authority v. Court of AppealsMactan Cebu Int’l Airport Authority v. Court of Appeals, ,

263 SCRA 736 (1996)263 SCRA 736 (1996)

CCONVENTIONAL ONVENTIONAL RREDEMPTIONEDEMPTION cont’dcont’d

81

RRIGHT A IGHT A RRETRO ETRO versusversus OOPTION PTION CCONTRACTONTRACT

(A)(A) Not separate contract, but Not separate contract, but

must be part of main must be part of main Contract of Sale Contract of Sale

(A) Generally principal contract, (A) Generally principal contract, but may be appended in but may be appended in another contract validanother contract valid

(B) Right to Redeem does (B) Right to Redeem does not need separate not need separate considerationconsideration

(B)(B) Option requires consider-ation Option requires consider-ation separate and distinct of the separate and distinct of the Price in order to be validPrice in order to be valid

(C)(C) Period of Option may bePeriod of Option may be beyond 10 yearsbeyond 10 years

(C) (C) Maximum Period for Maximum Period for exercise of Right of exercise of Right of redemption cannot redemption cannot exceed 10 yearsexceed 10 years

(D)(D) Option may be exercised Option may be exercised by mere notice to Offerorby mere notice to Offeror

(D)(D) Right of repurchase requires Right of repurchase requires in addition the tender of the in addition the tender of the amount mandated, including amount mandated, including consignation when tender consignation when tender not possiblenot possible

82

SSALIENT ALIENT MMATTERS ON ATTERS ON

RRIGHT OF IGHT OF RREDEMPTIONEDEMPTION

(a)(a) PPERIOD OF ERIOD OF RREDEMPTION:EDEMPTION:

When no Period agreed upon: 4 yearsWhen no Period agreed upon: 4 years

When Period agreed upon: cannot When Period agreed upon: cannot exceed 10 yearsexceed 10 years

When Period of “Non-Redemption” When Period of “Non-Redemption” StipulatedStipulated

Anchuel v. IAC,Anchuel v. IAC, 147 SCRA 434 (1987) 147 SCRA 434 (1987)

Tayao v. DulayTayao v. Dulay, 13 SCRA 758 (1965), 13 SCRA 758 (1965)

83

SSALIENT ALIENT MMATTERS ON ATTERS ON RRIGHT OF IGHT OF

RREDEMPTIONEDEMPTION cont’dcont’d

Pendency of Action Tolls Redemption Pendency of Action Tolls Redemption PeriodPeriod

Ong Chua v. CarrOng Chua v. Carr, 53 Phil. 975 (1929), 53 Phil. 975 (1929)

Non-Payment of Price Does Not Affect Non-Payment of Price Does Not Affect

Running of Redemption PeriodRunning of Redemption Period Catangcatang v. Legayada, Catangcatang v. Legayada, 84 SCRA 51 (1978)84 SCRA 51 (1978)

84

SSALIENT ALIENT MMATTERS ATTERS cont’dcont’d

Only tender of payment is sufficient.Only tender of payment is sufficient.Legaspi v. CALegaspi v. CA, 142 SCRA 82 (1986), 142 SCRA 82 (1986)

Consignation is not required after tender is Consignation is not required after tender is

refused.refused.Mariano v. CA,Mariano v. CA, 222 SCRA 736 (1993) 222 SCRA 736 (1993)

But when tender not possible, consignation But when tender not possible, consignation should be made. should be made.

Catangcatang v. LegayadaCatangcatang v. Legayada, 84 SCRA 51, 84 SCRA 51 (1978) (1978)

(b(b)) HHOW OW RREDEMPTION EDEMPTION EEFFECTED: FFECTED:

8585

Simply by Filing Judicial ActionSimply by Filing Judicial ActionLee Chuy Realty Corp. v. CALee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995), 250 SCRA 596 (1995)

Seller returning to Buyer:Seller returning to Buyer: Price of the salePrice of the sale Expenses of contract, and any other Expenses of contract, and any other legitimate payments made by reason of the legitimate payments made by reason of the salesale

Necessary and useful expenses made on Necessary and useful expenses made on the thing soldthe thing sold

ART. 1616ART. 1616

SSALIENT ALIENT MMATTERSATTERS cont’dcont’d

86

SSALIENT ALIENT MMATTERSATTERS cont’dcont’d

When Redemption Not Made, Buyer a retro When Redemption Not Made, Buyer a retro automatically acquires full ownership.automatically acquires full ownership.

Oviedo v. Garcia,Oviedo v. Garcia, 40 SCRA 17 (1971) 40 SCRA 17 (1971)

HHOWEVER:OWEVER: In real property, consolidation shall In real property, consolidation shall not be recorded in the Registry of not be recorded in the Registry of Property without a judicial orderProperty without a judicial order, after , after the seller has been duly heard. the seller has been duly heard.

Article 1607Article 1607

87

If Seller proves the transaction a sale a retro, he If Seller proves the transaction a sale a retro, he is given a period of 30 days from finality of is given a period of 30 days from finality of judgment to repurchase.judgment to repurchase.

Solid Homes v. CA,Solid Homes v. CA, 275 SCRA 267 (1997). 275 SCRA 267 (1997).

EEQUITABLE QUITABLE MMORTGAGEORTGAGE

DDEFINITION AND EFINITION AND EELEMENTSLEMENTS

• The contract entered into is The contract entered into is denominated as a Sale (absolute or denominated as a Sale (absolute or a a retroretro); and); and

(b) Real intention was to secure an (b) Real intention was to secure an existing debt by way mortgageexisting debt by way mortgage

Molina v. CAMolina v. CA, 398 SCRA 97 (2003), 398 SCRA 97 (2003)

88

RRATIONALE OF ATIONALE OF EEQUITABLE QUITABLE MMORTGAGE ORTGAGE PPRINCIPLERINCIPLE

EEQUITABLE QUITABLE MMORTGAGEORTGAGE cont’dcont’d

Prevent circumvention of law on usury and Prevent circumvention of law on usury and rule against pactum commissorium, i.e. against rule against pactum commissorium, i.e. against a creditor appropriating the mortgage property.a creditor appropriating the mortgage property.

To end unjust or oppressive transactions or To end unjust or oppressive transactions or violations in connection with a sale or property.violations in connection with a sale or property.

Spouses Miseña v. RongavillaSpouses Miseña v. Rongavilla, 303 SCRA 749 (1999)., 303 SCRA 749 (1999).Matanguihan v. CAMatanguihan v. CA, 275 SCRA 380 (1997), 275 SCRA 380 (1997)

Lao v. CALao v. CA, 275 SCRA 237 (1997), 275 SCRA 237 (1997)

8989

9090

RRULINGS ON ULINGS ON EEQUITABLE QUITABLE MMORTGAGEORTGAGE

Badges of Equitable Mortgage in Art. 1602Badges of Equitable Mortgage in Art. 1602Apply both to sale a retro and to a contract Apply both to sale a retro and to a contract purporting to be an absolute sale.purporting to be an absolute sale.

Tuazon v. CA,Tuazon v. CA, 341 SCRA 707 (2000) 341 SCRA 707 (2000)

Zamora v.CAZamora v.CA, 260 SCRA 10 (1996), 260 SCRA 10 (1996)

Parol evidence is competent and admissible Parol evidence is competent and admissible in support of allegation of equitable mortgage in support of allegation of equitable mortgage arrangement.arrangement.

Mariano v. CAMariano v. CA, 220 SCRA 716 (1993) , 220 SCRA 716 (1993)

Pactum CommissoriumPactum Commissorium principle does not principle does not apply:apply:

9191

(a)(a) When security for a debt is also money in form of When security for a debt is also money in form of time deposittime deposit

Consing v. CA,Consing v. CA, 177 SCRA 14 (1989) 177 SCRA 14 (1989)

(b) To an agreement between Lender and Borrower (b) To an agreement between Lender and Borrower which provides that in the event Borrower fails to which provides that in the event Borrower fails to comply with the new terms of payment, the agreement comply with the new terms of payment, the agreement shall automatically operate to be an instrument of shall automatically operate to be an instrument of dacion en pago without need of executing any dacion en pago without need of executing any document to such an effect.document to such an effect.

Solid Homes, Inc. v. CASolid Homes, Inc. v. CA, 275 SCRA 267 (1997), 275 SCRA 267 (1997)

RULINGS ON EM cont’d

CCONTRA:ONTRA: P/NP/N stipulation that upon makers’ failure stipulation that upon makers’ failure to pay interests, ownership of property to pay interests, ownership of property would automatically be transferred to would automatically be transferred to Payee and the covering deed of sale Payee and the covering deed of sale would be registered, is in substance a would be registered, is in substance a pactum commissoriumpactum commissorium in violation of Art. in violation of Art. 2088.2088.

A. Francisco Realty v. CAA. Francisco Realty v. CA, 298 SCRA 349 (1998), 298 SCRA 349 (1998)

A pactum commisorium sale is void, registration A pactum commisorium sale is void, registration and obtaining of new title by apparent buyer would and obtaining of new title by apparent buyer would also be void.also be void.

A. Francisco Realty v. CAA. Francisco Realty v. CA, 298 SCRA 349 (1998), 298 SCRA 349 (1998)

92

RREMEDIES EMEDIES UUNDER NDER EEQUITABLE QUITABLE MMORTGAGE ORTGAGE

SSITUATIONSITUATIONS

Apparent seller can seek reformation of Apparent seller can seek reformation of instrument (Art. 1605).instrument (Art. 1605).

An action for consolidation of ownership (in An action for consolidation of ownership (in case presented as sale a retro) would be void, and case presented as sale a retro) would be void, and proper remedy of mortgagee-buyer is to file proper remedy of mortgagee-buyer is to file appropriate foreclosure of the mortgage in appropriate foreclosure of the mortgage in equity.equity.

Briones-Vasquez vs. CABriones-Vasquez vs. CA, 450 SCRA 644 (2005)., 450 SCRA 644 (2005).

9393

Additional 30-day Period of Redemption is Additional 30-day Period of Redemption is allowed under Art. 1606, in event courts should allowed under Art. 1606, in event courts should find the sale was not equitable mortgage, find the sale was not equitable mortgage, provided:provided:

(a)(a) Honest belief that it was equitable mortgage supported Honest belief that it was equitable mortgage supported by convincing evidence, such as badges under Art. 1602, by convincing evidence, such as badges under Art. 1602, or consignation during trial of the amount of the alleged or consignation during trial of the amount of the alleged loanloan

Abilla v. Gobonseng,Abilla v. Gobonseng, 374 SCRA 51 (2002) 374 SCRA 51 (2002)

Vda. de Macoy v. CAVda. de Macoy v. CA, 206 SCRA 244 (1992), 206 SCRA 244 (1992)

94

RREMEDIES EMEDIES ININ EM EM cont’dcont’d

LLEGAL EGAL RREDEMPTIONEDEMPTION

DDEFINITION AND EFINITION AND RRATIONALEATIONALE::

Privilege created by law for reasons of Privilege created by law for reasons of public policy.public policy.

For benefit and convenience of the For benefit and convenience of the redemptioner, to afford him a way out of what redemptioner, to afford him a way out of what might be a disagreeable or inconvenient might be a disagreeable or inconvenient association into which he has been thrust.association into which he has been thrust.

Intended to minimize co-ownership.Intended to minimize co-ownership.Fernandez v. TarunFernandez v. Tarun, 391 SCRA 653 (2002), 391 SCRA 653 (2002)

Basa v. AguilarBasa v. Aguilar, 117 SCRA 128 (1982) , 117 SCRA 128 (1982) 9595

Written notice must cover Written notice must cover perfectedperfected sale saleArt. 1623Art. 1623

Spouses Doromal v. CASpouses Doromal v. CA, 66 SCRA 575 (1975), 66 SCRA 575 (1975)

Notice must be given by seller; and that notice given Notice must be given by seller; and that notice given by buyer or even by the Register of Deeds are not by buyer or even by the Register of Deeds are not sufficientsufficient..

Francisco v. Boiser, 332 SCRA 305 (2000)Francisco v. Boiser, 332 SCRA 305 (2000)Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962)Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962)

Salatandol v. Retes, 162 SCRA 568 (1988)Salatandol v. Retes, 162 SCRA 568 (1988)

LLEGAL EGAL RREDEMPTIONEDEMPTION cont’dcont’d

PPERIOD OF ERIOD OF LLEGAL EGAL RREDEMPTION EDEMPTION BBEGINSEGINS::

3030 DAYS FROM DAYS FROM WWRITTEN RITTEN NNOTICEOTICE

9696

Seller furnishing of the copies of deeds of sale to Seller furnishing of the copies of deeds of sale to co-owner would be sufficient.co-owner would be sufficient.

Distrito v. CADistrito v. CA, 197 SCRA 606 (1991), 197 SCRA 606 (1991)Conejero v. CAConejero v. CA, 16 SCRA 775 (1966), 16 SCRA 775 (1966)

Badillo v. FerrerBadillo v. Ferrer, 152 SCRA 407 (1987), 152 SCRA 407 (1987)

Notice to minors may validly be served upon Notice to minors may validly be served upon parents even when not judicially appointed since parents even when not judicially appointed since beneficial to the children.beneficial to the children.

Badillo v. Ferrer, Badillo v. Ferrer, 152 SCRA 407 (1987).152 SCRA 407 (1987).


9797

Deemed complied when co-owners signed Deemed complied when co-owners signed Deed of Extrajudicial Partition embodying Deed of Extrajudicial Partition embodying disposition of part of the property owned in disposition of part of the property owned in common.common.

Fernandez v. Tarun, Fernandez v. Tarun, 391 SCRA 653 (2002)391 SCRA 653 (2002)

Filing of ejectment suit or collection of rentals Filing of ejectment suit or collection of rentals against a co-owner dispenses with need for against a co-owner dispenses with need for written notice.written notice.

Alonzo v. IACAlonzo v. IAC, 150 SCRA 259 (1987), 150 SCRA 259 (1987)


98

IINSTANCES OF NSTANCES OF LLEGAL EGAL RREDEMPTIONEDEMPTION

(a)(a) Among Co-heirs Among Co-heirs (Art. 1088)(Art. 1088)

A co-heir cannot exercise the right of redemption A co-heir cannot exercise the right of redemption alone. alone.

De Guzman v. CADe Guzman v. CA, 148 SCRA 75 (1987), 148 SCRA 75 (1987)

No legal redemption for sale of the property of the No legal redemption for sale of the property of the estate.estate.

Plan v. IACPlan v. IAC, 135 SCRA 270 (1985), 135 SCRA 270 (1985)

Written notice to other co-owners deemed inutile by Written notice to other co-owners deemed inutile by fact that ebuyers took possession of property in full view fact that ebuyers took possession of property in full view of other co-owners.of other co-owners.

Pilapil v. CAPilapil v. CA, 250 SCRA 560 (1995), 250 SCRA 560 (1995)

Notice given by city treasurer will not suffice.Notice given by city treasurer will not suffice.Verdad v. CAVerdad v. CA, 256 SCRA 593 (1996), 256 SCRA 593 (1996)

9999

(b)(b) Among Co-owners Among Co-owners (Art. 1620)(Art. 1620)

IINSTANCES OF NSTANCES OF LLEGAL EGAL RREDEMPTIONEDEMPTION cont’dcont’d

Right of legal redemption arises only when shares Right of legal redemption arises only when shares of other owners are sold to a “third person,” and not of other owners are sold to a “third person,” and not to another co-ownerto another co-owner

Fernandez v. TarunFernandez v. Tarun, 391 SCRA 653 (2002), 391 SCRA 653 (2002)

Registration of the sale does not estop a co-ownerRegistration of the sale does not estop a co-ownerCabrera v. Villanueva, Cabrera v. Villanueva, 160 SCRA 627 (1988)160 SCRA 627 (1988)

Notice required to be given to co-owners must be Notice required to be given to co-owners must be in writing; and redemption by co-owner redounds to in writing; and redemption by co-owner redounds to the benefit of all other co-owners. the benefit of all other co-owners.

Mariano v. CA, Mariano v. CA, 222 SCRA 736 (1993)222 SCRA 736 (1993)

100100


No written notice required to co-owner who No written notice required to co-owner who acted as active intermediary in the acted as active intermediary in the consummation of the sale.consummation of the sale.

Distrito v. CA, Distrito v. CA, 197 SCRA 606 (1991)197 SCRA 606 (1991)

Redemption by co-owner, even when he uses Redemption by co-owner, even when he uses his own fund, inures to the benefit of all the his own fund, inures to the benefit of all the other co-owners. other co-owners.

Annie Tan v. CA, 172 SCRA 660 (1989)Annie Tan v. CA, 172 SCRA 660 (1989)

101


Redemption covers only “resale” and does not Redemption covers only “resale” and does not cover exchanges or barter of propertiescover exchanges or barter of properties

De Santos v. City of ManilaDe Santos v. City of Manila, 45 SCRA 409 (1972), 45 SCRA 409 (1972)

Requisite of “speculation” dropped.Requisite of “speculation” dropped.

Legaspi v. CALegaspi v. CA, 69 SCRA 360 (1976), 69 SCRA 360 (1976)

Does not apply if one adjacent lot is not also Does not apply if one adjacent lot is not also rural land rural land

Primary Structures Corp. v. ValenciaPrimary Structures Corp. v. Valencia, 409 SCRA 371 (2003), 409 SCRA 371 (2003)

(c)(c) Among Adjoining Owners Among Adjoining Owners (Art. 1621-1622)(Art. 1621-1622)

102102


(d)(d) Sale of Credit in Litigation Sale of Credit in Litigation (Art. 1634)(Art. 1634) - 30 days - 30 days

(e)(e) Redemption of Homesteads Redemption of Homesteads (Sec. 119, C.A. 141)(Sec. 119, C.A. 141)

The right to repurchase is granted by law The right to repurchase is granted by law and need not be provided for in the deed of sale. and need not be provided for in the deed of sale.

Berin v. CABerin v. CA, 194 SCRA 508 (1991)., 194 SCRA 508 (1991).

103

Under the free patent or homestead provisions of Under the free patent or homestead provisions of the Public Land Act a period of five (5) years from the the Public Land Act a period of five (5) years from the date of conveyance is provided, the five-year period to be date of conveyance is provided, the five-year period to be reckoned from the date of the sale and not from the date reckoned from the date of the sale and not from the date of registration in the office of the Register of Deeds.of registration in the office of the Register of Deeds.

Lee Chuy Realty Corp. v. CA, Lee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995)250 SCRA 596 (1995)

For purposes of reckoning the 5-year period to For purposes of reckoning the 5-year period to exercise right of repurchase, the date of conveyance is exercise right of repurchase, the date of conveyance is construed to refer to date of execution of the deed construed to refer to date of execution of the deed transferring the ownership of the land to the buyer. transferring the ownership of the land to the buyer.

Mata v. CAMata v. CA, 318 SCRA 416 (1999, 318 SCRA 416 (1999).).


104


(f)(f) Redemption in Tax Sales Redemption in Tax Sales (Sec. 215, NIRC of 1997)(Sec. 215, NIRC of 1997)

(g)(g) Redemption by judgment debtor Redemption by judgment debtor (Sec. 27, Rule (Sec. 27, Rule 39, Rules of Civil Procedure)39, Rules of Civil Procedure)

Period of redemption shall be “at any time within Period of redemption shall be “at any time within one (1) year from the date of registration of the one (1) year from the date of registration of the certificate of sale,” so that the period is now to be certificate of sale,” so that the period is now to be understood as composed of 365 days, unlike the 360 understood as composed of 365 days, unlike the 360 days under the old provisions of the Rules of Court days under the old provisions of the Rules of Court which referred to 12-month redemption period.which referred to 12-month redemption period.

Ysmael v. CAYsmael v. CA, 318 SCRA 215 (1999), 318 SCRA 215 (1999)

105

(h) Redemption in Extrajudicial Foreclosure (h) Redemption in Extrajudicial Foreclosure

A stipulation to render the right to redeem A stipulation to render the right to redeem defeasible by an option to buy on the part of the defeasible by an option to buy on the part of the creditorcreditor

Soriano v. BautistaSoriano v. Bautista, 6 SCRA 946 (1962), 6 SCRA 946 (1962)

One (1) year from registration in the Registry One (1) year from registration in the Registry of Deeds on Mortgage of Deeds on Mortgage (Sec. 6, Act 3135). (Sec. 6, Act 3135).

(i) Redemption in judicial foreclosure of (i) Redemption in judicial foreclosure of mortgagemortgage

((Sec. 47, General Banking Law of 2000, R.A. 8791).Sec. 47, General Banking Law of 2000, R.A. 8791).


106106

No right to redeem from a judicial foreclosure sale, No right to redeem from a judicial foreclosure sale, except those granted by banks or banking institutionsexcept those granted by banks or banking institutions

GSIS v. CFI,GSIS v. CFI, 175 SCRA 19 (1989). 175 SCRA 19 (1989).


The one-year redemption period in case of The one-year redemption period in case of foreclosure of real estate mortgage is not interrupted by foreclosure of real estate mortgage is not interrupted by filing of action assailing validity of mortgage, so that at filing of action assailing validity of mortgage, so that at the expiration thereof, mortgagee who acquires property the expiration thereof, mortgagee who acquires property at the foreclosure sale can proceed to have title at the foreclosure sale can proceed to have title consolidated in his name and a writ of possession issued consolidated in his name and a writ of possession issued in his favor.in his favor.

Union Bank of the Philippines v. CA, Union Bank of the Philippines v. CA, 359 SCRA 480 (2001359 SCRA 480 (2001))Vaca v. CA, Vaca v. CA, 234 SCRA 146 (1994234 SCRA 146 (1994))

107107


(j)(j) Redemption in Foreclosure by Rural Banks Redemption in Foreclosure by Rural Banks

Land mortgaged to rural bank under R.A. 720, Land mortgaged to rural bank under R.A. 720, may be redeemed within two (2) years from date of may be redeemed within two (2) years from date of foreclosure or from registration of sheriff's certificate foreclosure or from registration of sheriff's certificate of sale. If mortgagor fails to exercise such right, heirs of sale. If mortgagor fails to exercise such right, heirs may still repurchase within 5 years from expiration of may still repurchase within 5 years from expiration of 2-year redemption period pursuant to Sec. 119 of 2-year redemption period pursuant to Sec. 119 of Public Land Act (C.A. 141).Public Land Act (C.A. 141).

Rural Bank of Davao City v. CARural Bank of Davao City v. CA, 217 SCRA 554 (1993), 217 SCRA 554 (1993)

Heirs of Felicidad Canque v. CAHeirs of Felicidad Canque v. CA, 275 SCRA 741 (1997), 275 SCRA 741 (1997)

108108


(k)(k) Legal Right to Redeem under Legal Right to Redeem under Agrarian Reform CodeAgrarian Reform Code

Sec. 12 of R.A. 3844, grants agricultural lessee Sec. 12 of R.A. 3844, grants agricultural lessee right to redeem within 180 days from notice in right to redeem within 180 days from notice in writing and at a reasonable price and writing and at a reasonable price and considerationconsideration

Quiño v. CAQuiño v. CA, 291 SCRA 249 (1998), 291 SCRA 249 (1998)

Redemption right of tenant does not begin to Redemption right of tenant does not begin to run without written noticerun without written notice

Springsun Management Systems Corp. v. CamerinoSpringsun Management Systems Corp. v. Camerino, , 449 SCRA 65 (2005)449 SCRA 65 (2005)

109109

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